2014 (9) TMI 1068 - AT - Income Tax

Reopening of the assessment - applicability of provisions of section 50C - Held that - Section 50C was not applicable to the case of the assessee during the relevant period as the sale agreement in question was unregistered document and was not assessed by the Stamp Valuation Authorities. Hence, the reopening of the assessment on the ground of applicability of section 50C was itself bad in law. We accordingly set aside the order of the AO passed in reopened assessment proceedings under section 147 and restore the original assessment order dated 08.12.2008 under section 143(3) of the Act. - Decided n favour of assessee

Summary

Issues: Reopening of assessment under section 147 of the Income Tax Act based on applicability of section 50C

Reopening of Assessment under Section 147:
The appeal was filed against the Commissioner of Income Tax (Appeals) order dated 05.11.12 relevant to assessment year 2006-07, challenging the reopening of assessment under section 147 of the Income Tax Act. The Assessing Officer observed discrepancies in the sale agreement of the property, leading to the conclusion that the net short term capital gains had escaped assessment. The AO served a notice under section 148 for reopening the assessment, which was contested by the assessee before the CIT(A) on grounds that the provisions of section 50C were not applicable to their case. The CIT(A) upheld the reopening, prompting the appeal before the ITAT Mumbai.

Applicability of Section 50C:
The contention revolved around the applicability of section 50C to the case, with the assessee arguing that since the sale agreement was unregistered and not assessed by the Stamp Valuation Authority, the provisions of section 50C were not applicable during the relevant period. The AR for the assessee highlighted the insertion of words "assessable" and "explanation 2" in section 50C by the Finance (No.2) Act, 2009, effective from 01.10.09, emphasizing that these amendments were prospective in nature. Reference was made to a CBDT Circular and a decision of the Madras High Court to support the argument that the amendments in section 50C had a prospective application only.

Judgment and Conclusion:
The ITAT Mumbai held that section 50C was not applicable to the assessee's case during the relevant period as the sale agreement was unregistered and not assessed by the Stamp Valuation Authorities. Consequently, the reopening of the assessment solely based on the applicability of section 50C was deemed legally flawed. The ITAT set aside the AO's order in the reopened assessment proceedings under section 147 and reinstated the original assessment order dated 08.12.2008 under section 143(3) of the Act. As a result, the appeal of the assessee was allowed, with the order pronounced in the open court on 23.09.2014.